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Discontinuous System of Allowances: The Response of Prosocial Health-Care Professionals

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  • Hernandez-Pizarro, Helena

    (Universitat Pompeu Fabra)

  • Nicodemo, Catia

    (University of Oxford)

  • Casasnovas, Guillem López

    (Universitat Pompeu Fabra)

Abstract

This paper examines the unintended strategic effects of non-linear incentives in public policies. A system of health care subsidies structured in discrete intervals may lead to strategic behaviour. We provide new evidence on this issue, focusing on a case where the strategic actions are taken by healthcare providers (HCPs). We show that HCPs adjust the score of claimants in long-term care needs assessments, giving them the opportunity to access higher levels of care benefits. This adjustment does not bring any pecuniary gain for HCPs. By using a quasi-natural experimental setting -the implementation of Spanish long-term care (LTC)- we show that the distribution of the claimants' needs includes kinks around the thresholds set for the LTC system. These kinks reveal that healthcare providers adopt prosocial behaviour, helping claimants jump to a higher level of benefits without discriminating by health status, residence, or gender. By developing a new non-parametric estimator, we prove that these adjustments lead to a welfare loss. The additional cost per adjusted claimant per annum is approximately 1000 euro on average. We finally propose an alternative continuous system to allocate LTC benefits that could mitigate the prosocial behaviour of healthcare providers.

Suggested Citation

  • Hernandez-Pizarro, Helena & Nicodemo, Catia & Casasnovas, Guillem López, 2020. "Discontinuous System of Allowances: The Response of Prosocial Health-Care Professionals," IZA Discussion Papers 13758, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13758
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    Cited by:

    1. Serrano-Alarcón, Manuel & Hernández-Pizarro, Helena & López-Casasnovas, Guillem & Nicodemo, Catia, 2022. "Effects of long-term care benefits on healthcare utilization in Catalonia," Journal of Health Economics, Elsevier, vol. 84(C).
    2. Manuel Serrano-Alarcón & Helena Hernández-Pizarro & Guillem López i Casasnovas & Catia Nicodemo, 2021. "The effect of Long-Term Care (LTC) benefits on healthcare use," Working Papers 2021-12, FEDEA.

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    More about this item

    Keywords

    long-term care; prosocial behaviour; needs assessment; non-linear incentives;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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